They’re Dancing As Fast As They Can

Others are complaining about the lacklustre Employment Situation Report from the Bureau of Labor Statistics so I may as well join in the fun. The report is all too familiar: roughly 80,000 net jobs were created last month, far too slow for any genuine recovery, with the most jobs being gained in professional and business services, particularly temps, manufacturing, and healthcare. Even these numbers are small enough to make no meaningful difference in the overall picture.

The merry band of commenters at OTB are responding pretty much as you might expect, jeering at “conservatives and libertarians” to propose their own solutions to the problem, pointing to the decline in public sector employment, and suggesting fiscal stimulus. I’m neither a conservative nor a libertarian but I’m happy to weigh in with my own views.

At least around here the reason that state and local governments are trimming payrolls is that their employment contracts require them to do so. Revenues are stubbornly low despite increases in tax rates, the only choices for increasing cash on hand are drumming up more revenues or borrowing and as their credit ratings fall borrowing is becoming more expensive for them, and, failing that, they must cut payrolls. Employment contracts do not allow them to reduce wages or benefits so they must reduce the number of employees. Why isn’t more ire being directed at “sticky wages”, inadequate flexibility?

What’s the proposed alternative? Federal aid? That’s only temporary first aid and, as I’ve pointed out before, lots of the workers in question are in the top decile of income earners rather than the lowest. That’s not nearly as sympathetic a case in my eyes.

Something I think that people proposing measures to spur consumer spending fail to take into account: there’s nothing in the General Theory that says that additional consumer spending in Manchester inevitably produces more economic growth in Manchester. The stimulus might well take place in London, Bristol, or Glasgow.

Stimulating consumer spending in the United States is as likely to produce increased growth in China, Japan, Mexico, or Canada as it is here. Probably more so.

Consumer spending and government spending are not the only kinds of consumption. Until relatively recently our economy was much more dependent on business spending than it is now. Unfortunately, more business spending, unless it’s targeted over here won’t produce more job growth over here, either.

What we really need is more new business formation. New jobs are created by new businesses. They’re certainly not created by large, established businesses who’ve been trimming their payrolls with tedious regularity over the period of the last 30 years. The number of hourly employees of GM, Ford, and Chrysler are a fraction of what they were 30 years ago. That’s a trend that we should not expect to change.

So, let’s brainstorm about the kinds of steps that might increase the rate of new business formation. Here’s one: a national healthcare insurance system paid from general revenues rather than from a tax on employers (and employees). A tax on employment will increase the cost of new employees and reduce the amount of money available for capital investment, discouraging new business formation.

Things that reduce the cost of starting a business, doing business, or adding employees.

How about some other suggestions?

56 comments… add one
  • michael reynolds

    Drew will be along momentarily to demand a tax cut and a free hand to dump toxic waste or whatever, but with that snark aside. . .

    I could actually use an employee: a personal assistant. What stops me from hiring someone has nothing to do with macro-economic factors, or economic factors at all. It’s the odd nature of the job I need done. I need someone who can handle fan mail, handle minor promotional stuff, book travel, run errands and occasionally transport the kids. If they could handle Keynote that would be a big plus.

    But I’m too busy to hire and train that person and interviewing and training would be a nightmare. Unless circumstances absolutely force it on me I’ll save the time by cutting back on fan mail and promo etc…

    I doubt I’m typical, but basically if you’re a deli or a salon or a tech start-up, why deal with the hassle of hiring if you’re getting by without it?

  • Drew

    I decided to participate for one comment as part of the “merry band.”. My comment was more snark about how the job growth stats for months have underperformed what is considered the necessary rate to accommodate population growth………yet the unemployment rate magically levitates at 8.2%. It was a statistical or false statistic comment.

    But my good friend JP couldn’t resist invoking the uncertainty fairy. I was going to bite, but along with swearing off arguments with the lamp pole, I decided not to.

    I have noted many times that uncertainty is critical. Obamaphiles seem to only be able to come to grips with uncertainty in general consumer or industrial demand. They never seem to be able to get their arms around uncertainty in the return to investment by small business owners. They deny it’s existence. This is the point I always make. Unless my ears are lying to me, and perhaps t hey are, after all didn’t George Stephanopolous’s diary lie to him, it’s a very significant factor. Perhaps a dominating factor.

    I’d unleash energy production. Look at the fracking phenomenon. Jobs to do it, jobs as a result of lower energy costs. Much of manufacturing is energy intensive.

    Tax and regulatory concerns need to be diminished. Right now business extension and job creation is like walking into a cave. Yet Obama is doubling down.

    As for national health care. Who pays for the r evenues to fund it? Businesses and employees. The right hand gives it to the left. Only cost reduction will help. And boy will it help.

    Lastly, rotate back to the inherently more efficient and job creating sector from the less: from public to private.

  • michael reynolds

    I’d throw in one other thing which is probably wrong, but it’s soething I watched happen at a Mac World Jake dragged me to a few years ago. Going through the convention floor you see a dozen brilliant ideas for software. This will organize your photos, that will move your tunes around more efficiently, and so on.

    Then comes the Mac keynote. (This is a while ago when Apple still participated in Mac World.) And as the keynote goes on, you can see hope and asporation dying all around you. You can watch the venture capital and the money borrowed from mom go up in smoke, because Apple just did it better and included it in its basic bundle.

    It’s very hard to go up against the bigs — the Apples, Amazons, Macdonalds and Cokes. I don’t know if that’s gotten worse.

  • Drew

    “But I’m too busy to hire and train that person and interviewing and training would be a nightmare. Unless circumstances absolutely force it on me I’ll save the time by cutting back on fan mail and promo etc…”

    Your lazy and uncaring attitude is duly noted.

    “I doubt I’m typical, but basically if you’re a deli or a salon or a tech start-up, why deal with the hassle of hiring if you’re getting by without it?”

    And yet, historically they have. What has changed?

  • Drew

    From Instapundit comments

    “Please don’t use my name if you use this….

    I saw your thought on employers going Galt due to Obama administration overreach.

    I own a small company that I downsized from nine employees to one over the course of this recession. Mostly out of necessity.

    I was speaking this morning with another business owner who did the same.

    His quote on this was, “I’ll be damned if I’m going to create another job in this environment.”

    I have to agree. It has become more and more onerous to add full-time employees. Even if you have the work, you have to measure improvement in revenue against the additional hassle and costs. Also, you have to look at how much of that additional money you’re going to have to fork over to the government.

    A lot of those things have been there for a long time, but additionally we’re being told we’re evil and greedy.

    The owner is always the last one paid in a small business. Sometimes he or she doesn’t get paid, if it would hurt the business.

    With all those factors, it shouldn’t be a surprise to anyone when business owners don’t create more jobs. They should be surprised they actually do create a single job.”

    I know this is fantasy. JP and Michael Reynolds tell me so.

  • Icepick

    Getting rid of the current jackals in charge (both parties) would have to help. 85,000 people went on disability last month, 5,000 more than got jobs. (And about a third of those jobs are temp.) That’s about 1600 jobs per state vs. 1700 per state going on disability. The headline job ‘gain’ isn’t even enough to absorb the new people coming into the worskforce. Yet the current President said that today’s report is a “step in the right direction”. This after declaring that the private sector was doing fine a few weeks ago. This kind of delusional, cynical leadership will not help. There is nothing in the Republican proposals that indicates they will do much better. Endorsing the Ryan Plan with its ridiculous growth numbers in the outer years shows Romney to be just as cynical, as do his innumberable flip-flops on everything.

    We can discuss policy proposals all we want, but the reality is that none of that matters if the political class will only continue to do the same things they’ve been doing that got us into this mess. Seriously, do you think Boehner, McConnell, Reid, Pelosi, Obama or Romney (in whichever combination you care to choose) have what it takes to tackle regulatory reform, tax reform, healthcare reform, et cetera at the same time? Even one issue at a time they’ve shown themselves to be worse than useless. And Boehner, McConnell, Reid, Pelosi, Obama and Romney are what we’ve got to choose from.

    The only thing that matters is getting new leadership, and that isn’t happening. I may as well right up my own constitution for all the good it would do.

  • Icepick

    Your lazy and uncaring attitude is duly noted.

    Drew, how is that any different from guys like you telling people that you will hire them but only if they spend tens of thousands of dollars getting training so you don’t have to train them yourself? And even then employers will say, “Sorry, but you only have n years of experience, and we’re only looking to hire someone with n+2 years of experience.”

    Same deal, except that Reynolds isn’t complaining all the time about lack of suitable applicants and expecting potential applicants to drive themselves further in the hole for the chance to let Michael spit on them at the end.

  • michael reynolds

    Drew:

    You are the whiniest rich guy I’ve ever known. It’s not enough to be rich, you have to be loved for it. I’m not creating a job until they all stop saying mean things about me. Waaaah.

    So, on the basis of your example, I propose another explanation: today’s businessmen are pussies.

    Thank God no one ever said anything mean about Bill Gates, Cornelius Vanderbilt, John D. Rockefeller, Louis B. Mayer or Rupert Murdoch, all of whom were welcomed with palm fronds and hosannas wherever they went.

  • Icepick

    Here’s an article demostrating how the government works with big businesses to stiffle small businesses. Perfect corruption, from a perfectly corrupt Congress and President.

    Like I said, until you get rid of the jackals running the show, don’t expect anything else.

  • michael reynolds

    Maybe if we all sign a Hallmark “I Love You” card for Drew he’ll create some jobs.

  • Icepick

    Maybe if we all sign a Hallmark “I Love You” card for Drew he’ll create some jobs.

    Only if someone promises to subsidize the training of new employees.

  • TastyBits

    @Drew could provide a better explanation.

    Not all jobs are created equally, and not all budgets are allocated equally. Capital improvement is different from operating expenses. Increasing manufacturing capacity is not the same as increasing regulatory compliance capacity. Almost all government (local, state, national) workers are part of the operating expenses, and they will contribute little to increasing overall employment.

    Interestingly, Paul Krugman will spend to repel an alien (space) invasion. Is he willing to increase the Missile Defense budget instead?

  • Icepick

    Is he willing to increase the Missile Defense budget instead?

    LOL

  • Drew

    Ah, yes, the obligatory “whiney” charge, without any substance. Like I said lamp poles make boring debaters.

    Icipick

    “Drew, how is that any different from guys like you telling people that you will hire them but only if they spend tens of thousands of dollars getting training so you don’t have to train them yourself?”

    This is simply factually incorrect. You don’t understand what we do. In fact, in addition to any number of capital or other initiatives we take, we engage in management development. It is not atypical for us to hire a CFO who is a good candidate but not up to our standards, and use our uber-CFO to train them for what the position takes, and what will maximize our return. Similarly, our operating executives routinely recruit or promote from within and then spend 2-3 years developing those executives to be all they can be to maximize the company’s potential and it’s value upon sale. It’s a worthy investment.

    Sorry to expose your ignorance.

    Speaking of ignorance, despite all the ridiculous public and media commentary, it’s the Bain model. We stole it.

  • michael reynolds

    Ah, yes, the obligatory “whiney” charge, without any substance.

    A lot of those things have been there for a long time, but additionally we’re being told we’re evil and greedy.

    See, that’s whining.

    So is your incessant crap about uncertainty. If what you want is certainty get a civilservice job. What happened to businessmen being bold risk-takers? Is that whole thing as much b.s. as “job creators?” You only bet on sure things? Wow: entrepreneurial.

    Uncertainty. Waaaah. When Bill Gates started up there was no personal computer business, no existing demand, and absolutely no certainty. We had just come out of Nixon/Watergate/Vietnam and were in the midst of Whip Inflation Now buttons with Jimmy Carter and malaise on the way.

    Of course Gates had a pair.

  • michael reynolds

    Drew:

    You know, every time I write a book I’m investing. In addition to time and talent I put cash and deferred income into publicity and marketing. Uncertainty? I have no idea if it’s going to work. I take the risk. And if it fails I don’t blame whoever is in the White House.

    Uncertainty. Good grief, I can’t believe you can say something like that without feeling shame. Romney used other people’s money to take over other people’s businesses, fire the employees, strip out the assets, hire people in India and divert his money into Cayman’s accounts. That’s your ideal of a businessman?

    Steve Jobs and The Woz in a garage. Those are businessmen I admire. Ray Kroc creating a hamburger empire when no such thing had existed before. A bunch of New York Jews creating Hollywood out of nothing. Vanderbilt, coming from nothing. For that matter Bugsy Siegel.

    You and your avatar, Mr. Romney, are middle managers with delusions of Galthood.

  • Icepick

    Drew, I am talking about high-end machinists, whom you once claimed to find in short demand but also stated it wasn’t worth your while to train.

    People that make stuff aren’t worth the trouble to train, people that shuffle paperwork and money are. In a nutshell, that is the hollowed out economy we’ve got now. Obama didn’t do that; guys like you did that. It is so typical that the only employees you find valuable enough to expend your own capital on are at the C-level. Everyone else can go rot. And you finance guys have been pushing that attitude since Obama was just another drugged up dreamer in college.

  • It’s very hard to go up against the bigs — the Apples, Amazons, Macdonalds and Cokes. I don’t know if that’s gotten worse.

    Bullshit. All of those were at one time small/start-ups.

    What we really need is more new business formation. New jobs are created by new businesses. They’re certainly not created by large, established businesses who’ve been trimming their payrolls with tedious regularity over the period of the last 30 years. The number of hourly employees of GM, Ford, and Chrysler are a fraction of what they were 30 years ago. That’s a trend that we should not expect to change.

    Technological advancement is the largest destroyer of jobs out there. Schumpeter talked about it in regards to creative destruction. Further, if you think you can go backwards to those old days, you are an idiot. So the only way forward is new businesses, new ideas, new markets and this is what makes coming up with a proposal so hard….what is going to be the next big thing? If you could answer that you have an amazing crystal ball. And because you can’t answer it the slobbering dimwits in the OTB comments section conclude there is no new big thing…ever.

    Uncertainty. Waaaah. When Bill Gates started up there was no personal computer business, no existing demand, and absolutely no certainty.

    Not all uncertainty is the same. Facing uncertainty in the market place is one thing…facing uncertainty as to what government might or might not do in regards to your property is quite another thing.

    Consider the following…

    Would you and your wife keep writing like you do if the possibility that all your current intellectual property would be made public. That is, anyone could use it in anyway they wanted without crediting you or your wife and forget about compensation. Would you keep writing like you do? Or would you rethink what you are doing? If the answer is no, nothing would change you value your time and efforts and money very little, so spare us the speech about “investing”. If the answer is yes, then you see the difference between uncertainty in the market place (will my product sell) vs. dealing with people who have the force of law behind them and can make you do stuff you otherwise would not.

    A bunch of New York Jews creating Hollywood out of nothing.

    By stealing Edison’s inventions and ideas. The reason they moved to Hollywood is they figured it would make it cost prohibitive for Edison to take legal action until it was too late…and they were right.

    Would you mind if I stole your ideas Michael, made a fortune and told you to jog on?

    Icepick,

    Wow, that article….pure rent seeking if ever there was a case.

    Robert Weissen, with his brothers and other partners, own nine Sin City Cigarette Factory locations in Southern Nevada, including six in Las Vegas, and one in Hawaii. He said when the bill is signed their only choice is to turn off their 20 RYO Filling Station machines and lay off more than 40 employees.

    Good thing the Obamassiah saved 40 billion jobs!!! Don’t forget those!

  • michael reynolds

    Would you and your wife keep writing like you do if the possibility that all your current intellectual property would be made public.

    False analogy. What’s got Drew’s panties in a knot is minor variations in tax rates. No one’s talking about taking his house and giving him a trailer.

    False as well for a second reason: we get pirated all the time, so we’re already in that world.

    We couldn’t be in a less certain environment. The entire structure of my business is coming down around my ears — ebooks, digital self-publishing, piracy, new markets like China, transmedia, reduced marketing budgets, Borders dead, Amazon dominating, library funds being slashed, criticism mutating, the power of social media — and I keep plugging along.

    I eat uncertainty for breakfast. Uncertainty is my bitch.

  • michael reynolds

    By stealing Edison’s inventions and ideas. The reason they moved to Hollywood is they figured it would make it cost prohibitive for Edison to take legal action until it was too late…and they were right.

    Yeah: they took a risk. That’s what entrepreneurs do. They didn’t sit in Brooklyn and whine about uncertainty, they grabbed their balls and went off to create an industry.

  • Icepick

    Wow, that article….pure rent seeking if ever there was a case.

    Yes, and exactly the kind of uncertainty that is out there. The government just shut ’em down. That isn’t some minor tax variance issue. And with a 2,700 page law that has already generated 13,000 pages of new regulation, the PPACA is likely to do that and more.

    Good thing the Obamassiah saved 40 billion jobs!!!

    And all of them are green jobs!

    They didn’t sit in Brooklyn and whine about uncertainty, they grabbed their balls and went off to create an industry.

    Yeah, the RYO guys did that too, and they’ve just been fucked in the ass with a running chainsaw by the tobacco industry, the US Senate, the US House and President Obama. You aren’t dealing with that kind of uncertainty, Reynolds, nothing in that league.

  • Icepick

    Another problem with PPACA is that it is going to be impossible for any small business to know if it is in coimpliance or not. Tens of thousands of pages of tax code additions and regulations are going to be generated. Compliance will be impossible for any business that can’t either get out from under it completely OR isn’t big enough to have its own full-time lawyers. Which means that it is going to be a ripe environment for those with connections to get those without connections audited and shut down. The possible corruption is obvious. That is a regulatory burden that you won’t have, Reynolds, but will crush a lot of people. That too is uncertainty.

  • False analogy. What’s got Drew’s panties in a knot is minor variations in tax rates. No one’s talking about taking his house and giving him a trailer.

    I don’t care, what I’m trying to point out is that all uncertainty is not the same. In business it is one thing, when it is from the guys with a legal right to use force and violence it is something else entirely.

    And to bring it into the current context, suppose you are a small businessman with 10 employees. You can’t afford to provide them with health care since a policy for a group that small could become cost prohibitive quite suddenly if one of the employees gets seriously sick. Now along comes ObamaCare….what does that mean for that businessman? I don’t know. He probably doesn’t know. With 13,000 pages of new regulation not many people likely know. So the small business dude might sit there and say, “Crap, they could in effect confiscate all of may profits with this legislation…I don’t know. Shit, I’m gonna have to trim things down….”

    That isn’t a minor wiggle in the tax rate. A minor wiggle in the tax rate does damn little to economic output at the current tax levels.

    False as well for a second reason: we get pirated all the time, so we’re already in that world.

    That is not what I’m talking about. I’m talking about the guys who are backed up by a legal right to use force and violence if necessary who come along and say, “You don’t own that anymore…everyone effectively owns it now.”

    We couldn’t be in a less certain environment.

    Bullshit. The law is crystal clear. It says you own it. And you’ll own it for decades to come. If you transfer ownership to a corporation that corporation will own it and your kids will likely get to benefit from it as well.

    The entire structure of my business is coming down around my ears — ebooks, digital self-publishing, piracy, new markets like China, transmedia, reduced marketing budgets, Borders dead, Amazon dominating, library funds being slashed, criticism mutating, the power of social media — and I keep plugging along.

    Another Gish Gallop….but lets go through them….

    1. ebooks: I don’t see an issue here. If anything it could make it easier to buy your books. Might also increase competition though so that would increase your market place uncertainty.

    2. digital self-publishing. I don’t see the issue here either other than competition.

    3. piracy. That is expressly illegal and on this one the guys with the legal right to use force and violence if necessary are on your side. Besides, these guys are like the early Hollywood entrepreneurs…you should admire them, not complain. :p

    4. new markets like China. Not sure what the issue is here either? Is that you wont sell in that market or that it means more competition or more people to sell too or something else, or all of these things.

    5. Borders dead, Amazon dominating. Not sure I see the issue…okay so one place to sell your stuff is gone, but another takes its place…one where people can find stuff more easily and also not have to leave their house….are you saying Amazon is bad for your book sales?

    6. library funds being slashed. How much of your book sales depend on libraries? My first guess is it is a small portion, but I admit I haven’t a clue here…maybe it is huge.

    7. criticism mutating. Cry me a river.

    8. the power of social media. I could see this being great…or horrible. A bad review going viral, or a great one.

    Still all of these are developments in the market place…it is the usual aspect of doing business. It is a far cry from what some call “regime uncertainty” where it can be summarized as changes in the rules of the game.

    Yeah: they took a risk. That’s what entrepreneurs do. They didn’t sit in Brooklyn and whine about uncertainty, they grabbed their balls and went off to create an industry.

    On the backs of somebody else’s work. Yeah, very admirable. First steal another person’s idea…then make a vast fortune with it.

    Icepick,

    Yes, and exactly the kind of uncertainty that is out there. The government just shut ‘em down. That isn’t some minor tax variance issue. And with a 2,700 page law that has already generated 13,000 pages of new regulation, the PPACA is likely to do that and more.

    Precisely, and this is where I agree with Drew. I don’t think worrying about a minor change in the tax rate is a big deal. People can adapt to that. Right now nobody knows what all the fall out of PPACA will be.

    One of my son’s swim team friends’ father works in a field related to health care. They work with a bunch of doctors doing something or other for them (I don’t recall anymore…I’ll ask next time I see him). When I asked him what the impact of ObamaCare would be his reply was (in a nut shell), “We really have no idea as it is so big.”

    Could it put him out of business? Possibly. Is he and the other guys who own the firm worrying about it? I bet he is. Will it have an impact on how they run their business? I bet it will.

    Yeah, the RYO guys did that too, and they’ve just been fucked in the ass with a running chainsaw by the tobacco industry, the US Senate, the US House and President Obama. You aren’t dealing with that kind of uncertainty, Reynolds, nothing in that league.

    Exactly. No matter how big your balls are, the RYO guys don’t stand much of chance unless they can get some sort of legal relief (and that may take years, which would effectively kill their business anyways). If they tried to pull what the Hollywood guys did the response will be swift and harsh. They will have a visit from the local police, most likely a SWAT team(s), and it would be very, very ugly.

    But hey, ebooks…samething.

  • steve

    Steve V.- Businesses under 50 employees are exempted from the ACA, except that they can buy on an exchange if they want. They can also get tax credits for a while.

    The thing about uncertainty that bothers me is that you cannot measure it. You just invoke it, cite a few anecdotes from people who vote the same way you do and believe the same things you do, especially that it is all someone else’s fault, then tell others only you know the truth.

    I have trouble making it work when I know people who are hiring and starting new businesses. I hired 8 in the last year and am interviewing for another right now. (Please refer to me as job creator Steve in future comments.) I had the good fortune to assist in the care of a very sick kid who pulled through. Her Syrian parents are very grateful. I have a permanent invitation to their store to which they just added a small restaurant. I send them some business when I can. They built their own ovens. They work hard. They are growing, not whining about uncertainty. Maybe I should tell them to stop. At some point, the govt might do something awful, we dont know what, so why bother.

    Steve

  • sam

    Here’s (some) of the skinny for small businesses:

    The PPACA contains some benefits geared specifically to the needs of small employers. “I think the legislation is really looking out for the smallest of small businesses,” says Shawn Nowicki, director of health policy at New York Business Group on Health (NYBGH), a coalition of 175 employers, unions and health care providers in New York, Connecticut and New Jersey. How so? Right out of the gate the bill provides a tax break. Consider the following questions: Do you have 25 or fewer full-time employees? Are their average annual wages less than $50,000? And do you contribute more than 50 percent of your employees’ total premium costs?

    If your answers to those three questions are “yes,” then you might receive some assistance with your premiums, thanks to a tax credit of up to 35 percent of your contribution toward your employees’ health insurance for this tax year through 2013. The credit will increase to up to 50 percent for tax years 2014 and 2015. For this year through 2013, the full tax credit is available to employers with fewer than 10 employees whose average annual wages are less than $25,000. The tax credit gradually scales down as workforce size and average wages increase.

    Here’s an example. Suppose your business employs 10 full-time workers and their average wages are $25,000. If your annual employer health care costs are $70,000, then you are entitled to a $24,500 credit each year for 2010 through 2013. Starting in 2014 the credit will be $35,000.

    Businesses with 50 or fewer employees benefit from another tax-related benefit: They may opt out of providing insurance with no penalties. Got more than 50 employees? As is the case with smaller businesses, you are not required to offer health insurance. However, if you do opt out and it happens that one or more of your employees goes to the new state insurance pools to purchase coverage, you will pay a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment. [[Source]

    More at the cite.

  • michael reynolds

    Steve:

    Without going into great detail, and without wanting to sound all lordly and condescending, you don’t understand my business. Those are all actually very important issues.

    I’ll take one as an example: Amazon is a place to sell my books, yes. They’re also pushing price down and profit margins down and guess who gets paid an advance by cash-strapped publishers? (Answer: me.) Amazon is not confining itself to selling, they’re going big into publishing, using it more as a loss-leader than anything else, and they’re going to crush a lot of publishers, possibly including mine. What happens when the Big 6 are the Big 3 and one of those 3 is Amazon? What happens when Amazon knocks off Barnes and Noble and has 70% of distribution? I have fewer places to sell, which means I will likely get paid less. So: uncertainty. Risk.

    I also, by the way, have all the other uncertainties you’re concerned about, since I am a small business corporation and have a group health insurance policy — for which purpose I had to form a corporation to get around the insurers refusal to cover me for a pre-existing condition: age. See, I made the mistake of relocating from NC to CA and my previous insurance plan wouldn’t travel. But of course that’s not uncertainty caused by Mr. Obama, it’s uncertainty caused by Blue Shield, so I imagine it’s fine. I also don’t know what my income tax rate will be in a few years or my corporate tax rate.

    And I could totally whine about all that, but I’ve taken a different approach. I have this crazy idea that if I actually make a product, and make it well, I’ll be better off than if I sit around looking for excuses not to produce and crying because people are mean to me.

    By the way, here’s a link to a torrent with my most recent book: http://www.demonoid.me/files/details/2880607/007049510237/ Maybe you could explain to them how well I’m protected by copyright law.

  • Steve V.- Businesses under 50 employees are exempted from the ACA, except that they can buy on an exchange if they want. They can also get tax credits for a while.

    Whatever, so you have 51, or 75 or 100. Point is the line is arbitrary and those businesses are too small for the law of large numbers to kick in. The point still stands.

    The thing about uncertainty that bothers me is that you cannot measure it. You just invoke it, cite a few anecdotes from people who vote the same way you do and believe the same things you do, especially that it is all someone else’s fault, then tell others only you know the truth.

    No, Robert Higgs has done work on this kind of thing. When you talk about changing the way the game is played it can often make people less likely to want to play. Suppose we were to “play a game”….let us say Monopoly. Suppose though there is one change to the game. Once every 5 turns I can make a rule change and you have to abide by it. Would be interested in playing my version of Calvin Ball Monopoly?

    I have trouble making it work when I know people who are hiring and starting new businesses. I hired 8 in the last year and am interviewing for another right now. (Please refer to me as job creator Steve in future comments.) I had the good fortune to assist in the care of a very sick kid who pulled through. Her Syrian parents are very grateful. I have a permanent invitation to their store to which they just added a small restaurant. I send them some business when I can. They built their own ovens. They work hard. They are growing, not whining about uncertainty. Maybe I should tell them to stop. At some point, the govt might do something awful, we dont know what, so why bother.

    Wait I thought we weren’t supposed to us anecdotes.

    The point is that increases in uncertainty can reduce economic activity, not eliminate it…although enough uncertainty probably could do that.

  • Icepick

    The thing about uncertainty that bothers me is that you cannot measure it.

    Which is why adding to the uncertainty by nebulous expansion of the tax code and other regulations isn’t helpful.

    Businesses under 50 employees are exempted from the ACA, except that they can buy on an exchange if they want. They can also get tax credits for a while.

    Tax credits for a while? That’s certainty you can count on! Is that anything like the annual price fix for Medicare?

    Also, this legislation gives one great incentives to lay off half your staff if you’ve got 100 employees, and contract workers to plug the gap. Or divide your company into two halves. Or any number of possibilities I haven’t thought of.

    In other words, gaming the system is now just as important as doing what ever it is your company does. I am sure that will create a great deal of new jobs.

    I hired 8 in the last year and am interviewing for another right now. (Please refer to me as job creator Steve in future comments.)

    Given that you are in a business where about 70% of the revenue comes from the government tit I will call you a rent-seeker instead.

    And your impression is that the economy is doing great because you (in an industry heavily subsidized by the government and with high barriers to entry) and some Syrians are doing well? Thank God, I thought there were real problems out here. Instead the problem is that alot the people not getting rich are lazy whiners. It’s amazing how that all happened right at the end of 2007, that millions of people just became lazy whiners like that.

    I will point out that your evidence that everything is great is just as anecdotal. Also, there is a lot of evidence that everything is in fact in the shithole.

    You sound exactly like Drew sometimes. Of course, you are getting rich off the government teat, so you are in favor of more pillaging of the rest of the country for your own interests. Amazing how THAT works.

  • Also, Dave has provided some evidence as well, IIRC. Much of it was survey results for businesses.

  • Icepick

    So, Sam, all one has to do to get the credits is hire a tax attorney or tax accountant to wade through all the necessary paperwork to maybe get a credit? Or pay a penalty “if you do opt out and it happens that one or more of your employees goes to the new state insurance pools to purchase coverage, you will pay a fee of $2,000 per full-time employee, excluding the first 30 employees from the assessment.”

    Yeah, this is all so simple a caveman can do it, right?

  • Michael,

    Without going into great detail, and without wanting to sound all lordly and condescending, you don’t understand my business. Those are all actually very important issues.

    I see all of them as being uncertainty related to the market not uncertainty what the guys with a legal right to use violence are going to do. The two are worlds apart. Yes, the first can cause problems for businesses, but the second can be far more devastating…by orders of magnitude.

    This pertains the Great Depression, but it is on point. Look at the graphs, in particular the one on industrial production and the passage of the National Industrial Recovery Act. That act forced on businesses quite a few things that reduced economic output.

    The government’s intervention in markets can be far more deleterious than anything business can do because they have powers that businesses do not have (thank God).*

    As for more on regime uncertainty, link.

    The December 2009 regular survey on Small Business Economic Trends by the NFIB showed that capital expenditures and near-term plans for new capital investments remained stuck at 35-year lows. The same survey revealed that only 7% of small businesses saw the next few months as a good time to expand. Only 8% of small businesses reported job openings, as compared to 14%-24% in 2008, depending on month, and 19%-26% in 2007. The weak economy was the most prevalent reason given for why the next few months were “not a good time” to expand, but “political climate” was the next most frequently cited reason, well ahead of borrowing costs and financing availability. The authors stated: “the other major concern is the level of uncertainty being created by government, the usually source of uncertainty for the economy. The ‘turbulence’ created when Congress is in session is often debilitating, this year being one of the worst. . . . There is not much to look forward to here.”[4]

    Business investment in the third quarter of 2009 was down 20% from the low levels a year earlier. Job openings were at the lowest level since the government began measuring the concept in 2000. The pace of new job creation by expanding businesses was slower than at any time in the past two decades and, though older data are not as reliable, likely slower than at any time in the past half-century. While layoffs and new claims for unemployment benefits have declined in recent months, job prospects for unemployed workers have continued to deteriorate. The exit rate from unemployment was lower than any time on record, dating back to 1967.

    According to the Michigan Survey of Consumers, 37% of households planned to postpone purchases because of uncertainty about jobs and income, a figure that has not budged since the second quarter of 2009, and one that remained higher than any previous year back to 1960.[5] In 2009, companies were holding more cash — and a greater percentage of assets in cash — than at any time in the past 40 years.[6][7]

    The chairman of China’s sovereign wealth fund said in late 2008 that China had no plans for further investments in Western financial institutions. “Right now we do not have the courage to invest in financial institutions because we do not know what problems they may have.” Mr. Lou said that the sheer pace of new initiatives and new rules issued by Western regulatory agencies was disconcerting and made it even harder for him to choose worthwhile investments. “If it is changing every week, how can you expect me to have confidence?” he asked.[8][9]

    The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama’s closest ally in the business community, accused the president and Democratic lawmakers in June, 2010, of creating an “increasingly hostile environment for investment and job creation.” … “By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses.”[10]

    According to the April 2012 survey on Small Business Economic Trends, regulations steadily rose to the third position in the “Single Most Important Problem” over the course of the recession.[11]

    I’ll take one as an example: Amazon is a place to sell my books, yes. They’re also pushing price down and profit margins down and guess who gets paid an advance by cash-strapped publishers? (Answer: me.) Amazon is not confining itself to selling, they’re going big into publishing, using it more as a loss-leader than anything else, and they’re going to crush a lot of publishers, possibly including mine. What happens when the Big 6 are the Big 3 and one of those 3 is Amazon? What happens when Amazon knocks off Barnes and Noble and has 70% of distribution? I have fewer places to sell, which means I will likely get paid less. So: uncertainty. Risk.

    Unless people start buying less books as a result, I don’t think you’ll be selling less books. And nothing lasts forever…Amazon will eventually have competition.

    And it is not government sanctioned…it is part of the market place. That is not the kind of risk I’m talking about.

    *This is also why I don’t like the growing relationship between business and government.

  • Drew,

    Maybe you should look into hiring Icepick as a consultant…

    Also, this legislation gives one great incentives to lay off half your staff if you’ve got 100 employees, and contract workers to plug the gap. Or divide your company into two halves. Or any number of possibilities I haven’t thought of.

    Clever…and consultants may have an exemption.

    Same thing might work if you have 35 employees and are not going to provide health care…What I’ll have to pay $10,000. Well, those 5 employees? Yeah I fired them. What, those 5 guys over there…they are consultants, not regular employees. Yeah….errrr…consultants….

    Watch as steve and sam scurry to google to see what the rules are on consultants…..

  • steve

    Steve V- The business surveys show lack of sales as the number one concern.

    “I will point out that your evidence that everything is great is just as anecdotal.”

    Where did I say that? I said that many people are still hiring. I know others. I think that there is always uncertainty. The primary cause of this uncertainty that has some people complaining is the ACA. Health care costs for small business have been extremely volatile for years. For businesses with less than 50 employees, things just got a lot better. For large businesses that self-insure, things have hardly changed. For those in the middle, I guess we will have to see, but I dont see things having much more uncertainty given the variability in costs each year.

    Anecdotes? I am not sure why my anecdotes are less compelling than any others. So, let us call it a draw and we will ignore anecdotes. Since much of the work done by Higgs is just that, anecdote, we are back to square one, at least as far as his regime uncertainty goes. (Heck, we should have had the greatest economy ever, if regime certainty counted for anything, in the early to mid 2000s.)

    “Also, this legislation gives one great incentives to lay off half your staff if you’ve got 100 employees”

    We have tried this experiment in Massachusetts. It did not happen there. What if MA is unique? The ACA allows states to opt out and try their own plans. I hope some do, but am not optimistic as states have largely been ignoring health care costs while piling on more mandates that add to costs.

    Steve

  • Steve V- The business surveys show lack of sales as the number one concern.

    So? Did I say it was the only thing? Everybody who doesn’t like the regime uncertainty as one factor always makes this point as if it refutes anything.

    BTW, up for a game of Calvin Ball Monopoly? You didn’t answer. Once every five turns I get to make a rule you must abide by. Hmm the first one will be, give me all your money! Oh and you have to wear a mask.

  • steve

    Steve V- The incentive already exists to make everyone consultants or outsource them. Why dont they do it now? How does that change significantly with the ACA? Take your time and Google an answer.

    http://economistsview.typepad.com/economistsview/2012/07/private-in-equity-how-outsourcing-affected-wage-standards.html

    Steve

  • steve

    The ACA= Calvin Ball? Ok, we own the full set of Bill Watterson Calvin and Hobbes works. I am pretty sure health care was never in the game. I also read the ACA, and dont remember any Calvin Ball. I think this is what we call a straw man argument. Do you have anything realistic? I am citing specific numbers when possible and what the bill says. You counter with………..?

    Steve

  • Did you read that link steve,

    Over the past 3 decades, a rising share of work that used to be done “in-house” has been outsourced to outside contractors. Sometimes, the exact same work is being done at the same physical location—but by someone with a different employer of record.

    Outsourcing has been going for sometime. Icepick’s point wasn’t that EVERYONE will be outsourced, but that the ACA may lead to more outsourcing as a way to try and dodge some of the provisions. You know…game the system….like they gamed the system in MA. Some individuals would get health care when they needed access, but once they were done with their treatment dropped out and stopped paying their premiums.

    The ACA= Calvin Ball?

    Oh for God’s sake…the point was, would you play a game where one person has the ability to change the rules and you have to abide by the new rules? Most people would not like such a game. Well, unless they are the one who can change the rules.

    Perhaps abstract thinking is just not your thing…..

  • michael reynolds

    Steve V:

    I see all of them as being uncertainty related to the market not uncertainty what the guys with a legal right to use violence are going to do. The two are worlds apart. Yes, the first can cause problems for businesses, but the second can be far more devastating…by orders of magnitude.

    First off, when you say that thing about violence it makes you sound like a crazy person. You don’t think business can do violence? Maybe you could explain that to people left crippled or damaged or dead by dangerous medicines or tainted food or dangerous vehicles or poorly-maintained planes. What a load of propaganda.

    It’s absurd given what we’ve just been through to pretend that government is the bogey man and business is purely benign. That wasn’t the USG getting bond rating agencies to lie so they could peddle crap they knew was worthless.

    You squeeze everything through your libertarian ideology and come up with nonsense. Business would not exist in this country at anything like its level of prosperity without all those violence-prone arms of government. Evidence? The entire world. That’s my evidence: the entire world, every country on every continent. We’ve been over this before and you never have an answer: every single wealthy nation on earth has government-regulated capitalism. 100% All.

    There are precisely zero examples of wealthy nations with unregulated capitalism. None. And there never have been. Ever.

    So to have this knee-jerk “government bad, business good,” reaction is ridiculous. It’s in opposition to the clear evidence. You might as well be preaching Scientology. A rational conclusion is that government and business are both necessary, and both can cause problems, and are both capable of doing evil, so we should have balance between the two.

  • Icepick

    Steve V, big companies have been doing that to get around various labor laws and to manipulate UI rates for some time. You have no idea how complicated the corporate structure is JUST at Walt Disney World Resorts. Forget all the other theme park locations around the world, forget the movie studios (plural), the television arm (ABC, ESPN, the various Disney Channels and so forth) and the restaraunts and the stores and the condo sites and God only knows what else. At WDW alone there are a myriad of companies broken up and broken out and legally segregated this way and that. There are firms that specialize in this stuff. I only mentioned the idea earlier because I already know about that stuff. Some firm MIGHT be able to make a go of doing this stuff for smaller businesses, but it will be a boutique firm. The bigger companies would not take on the small fry. (It used to be called DESELECTION, which was basically firing clients.) Depending on the structure of Drew’s group they can probably make use of such firms anyway. Plus, it is going to take well-credentialed specialists (read: LAWYERS) to make all of these shenanigans work.

    The whole thing is going to work towards just making it harder for smaller firms to become bigger firms without selling out completely to big PE types. (They had problems on that front anyway, now they’re probably going to be bigger.)

    SHORTER: It’s another way for the big fish to cut down on competition.

  • Icepick

    That wasn’t the USG getting bond rating agencies to lie so they could peddle crap they knew was worthless.

    You need to study up on how those bond rating agencies came to have the particular power they had. It doesn’t look good for the EVERY GOVENRMENT REGULATION EVER ENACTED IS A GODSEND crowd.

  • steve

    “like they gamed the system in MA. Some individuals would get health care when they needed access, but once they were done with their treatment dropped out and stopped paying their premiums.”

    And just how often does this actually happen in MA? If you dont know, I can probably help you find it, which is to say, not much. They have limited enrollment periods. Also, they then pay their penalty/tax while not in the system.

    “…the point was, would you play a game where one person has the ability to change the rules and you have to abide by the new rules? ”

    Who is this mythical one person who will change health care laws? Obama? If only we had known! We could have avoided that messy 13 months dragging on to write and pass the bill. No, I am fine on abstract thinking, not much on the bizarre.

    Caveat- In these weird internet discussions I think we often end up taking sides that dont really express entirely what we believe. Just so you know, I think it likely regime uncertainty has some effect, I just dont know how much, and I dont know why it affects some people and not others. I also think there is some element of self-fulfilling prophecy.

    Steve

  • steve

    “You need to study up on how those bond rating agencies came to have the particular power they had.”

    I would agree that it is a mistake to have so few bond rating agencies, and that they have to be officially approved by the USG. That said, even Drew has defended them in the past. The fact that they were the only official ratings agencies has been true for a long time. Why did they go so bad, so fast when they did? Is it likely to have been any different if we had more of them? Given the group think of the time, and the Gresham’s dynamic at work, I doubt it. YMMV.

    Steve

  • steve,

    The fact that they were the only official ratings agencies has been true for a long time. Why did they go so bad, so fast when they did?

    The problem wasn’t just the bond rating agencies, but also the fact that many institutional investors are required by law to use their ratings when choosing investment vehicles. That’s how so much institutional money went into the AAA rate junk mortgage-based investments. The rules were put in place to keep fund managers from investing in “risky” investments. Guess that didn’t work out too well.

    Or, you look at something like the EPA gasoline fuel efficiency ratings. It’s one thing to require all car makers to rate their vehicles using that (now very antiquated) standard. It’s quite another to enforce manufacturer-wide averages using those standards, and it’s something yet again to ban any manufacturer from advertising any other standard. That’s how we get the crazy claims for fuel economy for hybrids, and people suing said companies for false advertising when the EPA estimate doesn’t comport with reality, not to mention the lack of very efficient diesel vehicles in this country. These kinds of problems are common in complex regulatory systems which are slow to adapt and have strict compliance mandates. Oh, and then you have to add in all the state rules (hello California).

    Also, last time I checked, MA has about the highest health-care costs in the country. Whatever the PPACA does, there doesn’t seem to be much evidence that it will actually control costs and it’s likely to make them worse since utilization could increase. How is that going to effect state budgets? Advocates for the PPACA don’t understand how any state could refuse the “free” money, but 10% of hundreds of millions to billions of dollars (no one really knows what the actual costs will be) is a lot of money to state budgets that are already thin. And in anti-tax states, politicians have to decide how they’re going to get that 10%. The politics of those decisions are what is driving some states to consider not adopting the medicaid expansion.

    As far as uncertainty goes, as mentioned before, my brother runs the family business, which is a small construction firm in Colorado. He’s been forced to downsize over the last decade from a couple of dozen down to, last time I checked, about 5 employees. He had to dump health insurance (which also had the effect of dumping his own coverage) several years ago. The PPACA will give them someplace to get coverage. On the other hand, the few small firms left that offer health benefits will certainly drop coverage. That will be the lesser of two evils – whatever the case, his employment costs will go up which, for him, will come from the penalty/tax. It’s not clear that this bill will be such a big help to small businesses like his. He lacks economies of scale, so he may end up comparatively disadvantaged to larger competitors. No one really knows how that will shake out.

    Uncertainty is a factor, but from my brother’s perspective the bigger problem is the cost of employment. He says the incentives are now aligned to keep as few workers as possible. It’s cheaper for him to pay overtime when necessary and his employees like that better too. Gone are the days of, for example, hiring unskilled laborers or student labor/apprentices over the summer. The costs of employment and the competitive environment don’t allow for it anymore.

    Michael,

    You are the whiniest rich guy I’ve ever known.

    You forget that Drew’s tens-of-millions doesn’t make him rich.

    As for you hiring help, well it seems to me the simple answer is that it isn’t worth it. I mean, if you’re not willing to invest the time and resources to find a candidate and train them then it doesn’t sound like you think you’d get much return on that investment.

  • michael reynolds

    I mean, if you’re not willing to invest the time and resources to find a candidate and train them then it doesn’t sound like you think you’d get much return on that investment.

    That’s basically it. I’d get a marginal improvement, but not as much as I’d like. It wouldn’t be life-altering. On the other hand since we’re a four person health plan with two of us old maybe more young bodies would lower my rates.

  • Icepick

    Also, last time I checked, MA has about the highest health-care costs in the country.

    You understand that someone on the “getting paid” side of the equation doesn’t think that is a bad thing.

    Going way back in the thread, Drew wrote

    This is simply factually incorrect. You don’t understand what we do. In fact, in addition to any number of capital or other initiatives we take, we engage in management development. It is not atypical for us to hire a CFO who is a good candidate but not up to our standards, and use our uber-CFO to train them for what the position takes, and what will maximize our return. Similarly, our operating executives routinely recruit or promote from within and then spend 2-3 years developing those executives to be all they can be to maximize the company’s potential and it’s value upon sale. It’s a worthy investment.

    Sorry to expose your ignorance.

    This was in the context of Reynolds looking to hire an assistant. So Drew’s whole analogy was simply stupid by comparison. Reynolds isn’t looking to hire someone in order to train themm to be a successful writer of YA fiction. In THAT case it would be a valid comparison.

  • Icepick

    Andy wrote in another thread:

    So what happens when states have to come up with the 10% cost for the Medicaid expansion? More layoffs/reduced services in other areas followed by calls from the PPACA’s biggest supporters for more federal aid to the states to raise public sector employment?

    C’mom, man! It’s only ten percent! How much can that possibly matter?

    (Not to mention all the regs the states will have to write, enforcement and compliance costs, et cetera. Are the feds going to pay 90% of ALL costs, or just of insuring people. That’s a non-trivial distinction. If it is 90% of all costs, that gives states incentives to run a shoddy program that allows for a lot of sinecures on the public dime. Any bets on how that would work in CA or IL? Or anywhere?)

  • jan

    Michael is a writer, investing in lofty thoughts story plots, writer’s block/fatigue, deadlines, and editors keeping him on target. Business overhead, employees, production numbers, are not his thing. However, when people get into his face, making assumptions about his work, I detect some defensiveness: “Without going into great detail, and without wanting to sound all lordly and condescending, you don’t understand my business.” Well, he hardly understands other people’s work/business either.

    Steve is a physician who seems current in all things related to medical advancements, including the ACA legislation which blankets the profession with layers of new bureaucracy. He lauds and wholeheartedly embraces it. While I respect his position, he seems insensitive to those who don’t share his ‘confidence’ or enthusiasm for this new HC system. And, no matter what the CBO or bureaucrats predict, as to future costs to the states, federal government, service providers or consumers, it will all end up being a crap shoot.

    For example in 1965, upon the passage of Medicare, the CBO predicted it would cost $60 billion by 2010. The real numbers, in 2010, were $480 billion — 8 times that prediction! Now consider the current ACA bill of 2733 pages, which is said to create some 159 new boards, panels and programs, and tell me that anyone can possibly know where the costs will end up! Then there are the 20 taxes involved with this policy that few people either know about, discuss or care about, until it directly effects them.

    I appreciate Steve’s anecdotal stories, as well, about people being unfazed or undaunted by any business climate negativity, including himself. But, similar, to when a firestorm or hurricane rips through an area, where some houses stand and others are destroyed, so it is with the success and failures of people. In these slow fiscal times, some seem to be holding their own, or actually prospering, while others, are simply spinning their wheels or under water. It’s basically a fickle, unnerving time for who lands in the wins or loses bin. With a government, though, who is pounding success, taxing the upper middle class and beyond, dividing the classes, erratically increasing regulations, encouraging the public’s dependency on government assistance, why should one try to get ahead? It almost seems futile. Because, if you make any more money, you just inch closer to being taxed at a higher rate. It’s equivalent to taking one step forward, with the promise of being forced two steps backwards.

    As to ideas what to do: I would do away with the ACA, in total, devising a type of HC reform that was patient/consumer centered, who were savvy to their own care and the cost therewith. I like HC accounts, which are currently being diminished under the ACA. Tort reform was not addressed by Obama, because of all the political/campaign donations he receives from lawyer groups (according to Howard Dean). But, this should be a priority, along with opening up competition among insurance companies, and strengthening the safety net for those can’t afford medical care. Preventive HC should be highlighted and covered by insurance. Health-conscious lifestyles should be rewarded by reduced health insurance rates (similar to what insurance companies do for good drivers). Tax and entitlement reform should be on the table. Government bureaucracies should be reviewed with a fine-tooth comb and either removed or consolidated. There should be incentives for green energy and fuel efficiency, but not at the price of penalizing or constantly opposing fossil fuel or natural gas exploration/production. Upgrading, repairing, and maintaining our vulnerable electric grid is of vital importance. There also needs to be a fairer mediated balance between environmental extremism and corporate/industrial exploitation, including a curtailment of mean and meaningless EPA regulatory powers.

    I could go on, but this is too long as it is. There are many ideas that could be extrapolated from both sides of the aisle and implemented for the good of the country, by giving more power to the people rather than the strong arm of the government.

  • steve

    @Andy- Your brother will not have to buy health insurance for his workers. He is exempt. However, unless he is in a buying group, he likely faces the same problems I did until we went over 50 employees. Health insurance costs more when you have to buy it through a broker. The costs are also much more volatile. I have been faced with an insurer asking for a 26% increase in premiums when we had some illness in the group and some premie births. What your brother will be able to do is buy from an exchange. Health insurance for businesses with under 50 employees usually costs 10%-15% more due to broker fees and underwriting. That should disappear for him.

    He will still be faced, as I am, with rising costs of insurance. That is the weak part of the ACA, but if it had not been passed, he would have faced those same cost increases, but with a higher baseline.

    Jan- Among the many reasons I voted for the GOP until 2008 was the hope for tort reform. Experience shows the GOP will not spend any political capital on this. Heck, a bunch of their kids are malpractice lawyers, just like for the Dems. Besides, while it will save a bit of money, it will be relatively small. Look at the Texas experience. I support it as I think it necessary to get physician buy in for reform.

    I think HSAs might help some, just not very much. They always sound good to people who are pretty healthy. The problem is that most of our spending is done by a small minority. These are people with chronic illnesses and people with significant acute illnesses. Your consumer savvy person can save some money on using generics vs brand name drugs, but when it comes to their chemo, CABG, total knee or colectomy they are going to go over the limits of any conceivable deductible. They only get to decide once and they cannot take it back if they do not like the results. When told you have lung cancer (random example) people really dont decide to go shopping for the lowest price. They want care close to home so they can be surrounded by people who love them. They want care by people they know, or are recommended to them by people they know.

    Steve

  • jan

    “Among the many reasons I voted for the GOP until 2008 was the hope for tort reform. Experience shows the GOP will not spend any political capital on this. Heck, a bunch of their kids are malpractice lawyers, just like for the Dems. Besides, while it will save a bit of money, it will be relatively small.”

    Fair enough. However, the way I look at tort reform is how it would effect other aspects of medical costs that are associated with excess litigation. Theorically, at least, it should decrease the overhead expense of malpractice insurance for physicians, which would be a boon for those in private practice. But, more importantly, I could see it reducing some of the CYB (cover your butt) kind of diagnostics that is frequently done, to avoid the possibility of a frivolous lawsuit.

    For instance, when my own Mom was hospitalized 5 years ago, the tests they wanted to run were extraordinary. While I wanted her to have the best care, I actually lobbied the doctor to eliminate a few of these. It’s not only costly, but can be hard on a frail patient undergoing them as well.

  • jan

    “I think HSAs might help some, just not very much. They always sound good to people who are pretty healthy. The problem is that most of our spending is done by a small minority.”

    How I view HSA’s is that every bit helps — even small efforts. HSAs, puts people in the roles of ‘savers’ in anticipating their costs for future health problems. Even if these savings don’t go very far, I think it aids them in becoming better and more knowledgeable consumers of medical services. Why the ACA now limits what you put towards these accounts baffles me. It’s as if they are discouraging people from becoming actively involved in their own health care costs.

  • TastyBits

    @steve

    Few people understand the costs for people outside “the system”. Most owners of small companies (especially under 20 employees) would like to be able to offer health insurance, but it is cost prohibitive. They are n0t banking the money for health insurance, and they are not “rolling in the dough”.

    The HSA concept is a good idea, but the rules require a tax accountant to work out. There are at least two with some differences, but I could never figure out how it worked. I have never understood why medical expenses were not tax deductible. As to lowering the price for a policy, I doubt it. People without health insurance are going to use it at the same rate as present users.

    A simple system should start with affordable catastrophic insurance. A high deductible ($5 – 10k), would insure it was only used when necessary, and covering preexisting conditions would not be a problem. I would use Flood Insurance as the model. Most of my fellow free riders would purchase it as fast as we could. We are not partying with the $10 – 20k we are saving. We face financial ruin, and this would remove one of the worries a lot of us have.

    Knee and hip surgery should be in the same category as LASIK. It is possible to live without any of these, but my opinion is shared with few others.

    I do not want to get dragged into the PPACA fight. In my opinion, the Republicans won as big or bigger than the Democrats. The Republicans will repeal and replace it with another bill to benefit the same players (including the Democrats). Somehow, each party is able to find a vote when they need it. It is all part of the game. Most of us are being played, but a few can see it.

  • TastyBits

    @Steve Verdon

    While you can see the “violence inherent in the system”, most cannot. Ultimately, the government controls the use of violence, but most US citizens will never feel the “jack booted foot” of the government on their neck. Instead, we will be regulated into conformity. The government has innumerable means to force its will upon the people, but most people never experience it directly.

  • steve

    @Tasty- Lots of really small businesses are family businesses. They want to have insurance, it is just not affordable for many of them. So, I think you are right on that point. I think universal catastrophic is a possibility, but you grossly underestimate the deductible limit to make this affordable. If you want a plan with $5000-$10,000 deductible limits, you will have that with a bronze plan under the ACA. The problem in terms of cutting national health spending is that too much of our spending occurs over that deductible limit.

    Steve

  • TastyBits

    @steve

    With a high deductible, it will only be used for major medical issues. With the existing pool of “free riders” paying into it, there should be more people paying into the fund than people drawing out of the fund. It would be more complicated, but it should be vastly simpler than the present system. If this (pool and fund) cannot be sustained, I fail to understand how anything else will work.

  • steve

    “With a high deductible, it will only be used for major medical issues. ”

    Deductibles have been increasing. Few people have health insurance w/o one anymore, yet medical costs have not really come down. Maybe they need to be even higher, I am not sure, but most spending is on chronic disease and large, acute spending. For those who complain that medical insurance is not really insurance, they miss the point that spending on routine things that are most likely to be affected by deductibles or market mechanisms do not make up a very large percentage of our health care costs. That said, I do wish some states would try an aggressive HSA type plan. I could be wrong.

    Steve

  • Faye Kellerman is entering YA with her daughter.

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